If President Trump’s major tax reform proposal were a coin toss, today most New Jersey leaders are saying the policy leaves the Garden State on the losing side. In a sweeping overhaul, House GOP lawmakers worked with the president to unveil an ambitious tax plan with nearly $6 trillion in cuts by most estimates.
“We’re going to cut taxes for the middle class, make the tax code simpler and more fair for everyday Americans and we are going to bring back the jobs and wealth that have left our country,” said President Trump on Wednesday.
It includes cutting the corporate tax rate from 35 percent to 20, while taxes for small business owners will be capped at 25 percent. Perhaps the biggest change is reducing the number of personal tax brackets from seven to just three. They’re funneled instead to 12 percent, 25 percent and 35 percent brackets. And, it doubles the standard deduction for individuals and families, raising it to $12,000 a year for single filers and $24,000 for married couples.
“There’s maybe a benefit to making the tax code simpler, but in terms of reducing the number of brackets, it usually makes the tax code less fair. The more brackets you have on an income tax the more spread out it is over income,” said Jon Whiten of liberal think tank New Jersey Policy Perspective.
The proposal also eliminates a key deduction for New Jersey taxpayers which would end their ability to deduct income and property taxes they pay to state and local governments from their federal filing. According to the Tax Foundation, New Jersey was third in the nation, behind just California and New York, as the largest beneficiary of that deduction.
“The most recent numbers that we’ve seen show the average New Jersey taxpayer would see a tax increase from their federal tax bill of $3,500 if the state and local tax deduction went away,” said Whiten.
“Right now, I think we get back 38 cents for every dollar we send down to Washington, so I’m working closely, watching it closely with the congressional delegation. I’ve reached out to Congressman Lance and Congressman Frelinghuysen because I want to make sure they don’t take that away,” said Sen. Kip Bateman.
More than 50 percent of taxpayers in Reps. Lance and Frelinghuysen’s districts take the deduction. Other than one area of Long Island, that’s more than any other district in the country.
“I do have a concern about the fact that I favor the continued destructibility of state and local taxes. That’s incredibly important to New Jersey and I’m trying to lead the charge in that area,” said Lance.
Lance wouldn’t say if he’d vote for the bill if the eliminations remain.
“It would be very difficult for me to do so, but I’m fighting what I think is the good fight and I hope that we can preserve it,” he said.
There’s few details on just how much these tax cuts would cost or where the federal government will pull funding from.
“Like everything else, it’s very thin on details. Secondly, it looks like if you’re really wealthy, you’ll do really well. If you’re in the middle class it’s a mixed bag at best. And if you’re striving to get in the middle class, there’s nothing for you,” said Democratic Gubernatorial candidate Phil Murphy.
Republican gubernatorial candidate Kim Guadagno opposes eliminating the deductions adding in a statement, “This reinforces the fact that we have to lower taxes — especially property taxes — in New Jersey and give middle class families a break.”
Whether or not this bill will succeed is a whole other question. It’s likely to cause tension within the Republican party, who could be forced to make politically damaging votes.